Hiring Your First Employee
Hiring Your First Employee:
A Step-by-Step Guide for Creative & Marketing Agency Founders
Includes Pensions, Payroll & Compliance - Without the Financial Guesswork
Hiring your first employee is a big moment. It usually means your agency has reached a point where client demand has outgrown your capacity, and you're ready to scale -but it also means stepping into a new level of responsibility as an employer.
If you're a creative or marketing agency founder navigating this milestone, you're likely juggling excitement with questions like:
Can I afford this? What do I need to set up? And what happens if I get it wrong?
This guide is designed to walk you through the essentials of hiring -from pensions and payroll to your ongoing legal obligations -without getting lost in jargon or overwhelmed by admin.
Do You Need a Pension Scheme If You’re the Only One on Payroll?
Let’s clear this up first - because it trips up a lot of founders.
If you're the sole director of your company and you have no employees, you’re not considered an employer for auto-enrolment purposes. That means you do not need to set up a workplace pension scheme, and you don’t have to make pension contributions.
However, the moment you hire someone - even part-time - that changes. Your auto-enrolment duties begin on the day your employee starts work.
If you’re in the sole director category and not hiring yet, it’s good practice to notify The Pensions Regulator that you’re not an employer. You can do that via their online declaration form.
What Happens When You Do Hire Someone?
As soon as your new team member starts, you become an employer -and that comes with legal obligations. One of the most important (and often overlooked) is your responsibility to provide a workplace pension if your employee qualifies.
This is part of the UK’s auto-enrolment legislation, introduced to help more people save for retirement.
You're required to:
Assess whether your employee qualifies
Enrol them into a compliant pension scheme if they do
Make regular contributions alongside theirs
Notify The Pensions Regulator that you've complied with the law
Your pension duties are not optional, and they start immediately when your employee begins work.
Who Needs to Be Auto-Enrolled?
Your employee must be enrolled if they meet all of the following:
They are aged 22 or over
They earn more than £10,000 per year (about £833/month)
They usually work in the UK
You don’t need their permission to enrol them. You are legally required to do so, and they’ll have the option to opt out if they choose -but the process begins with you.
How the Auto-Enrolment Process Works
You’ll start by choosing a pension provider -most small businesses go with NEST, The People’s Pension, or Smart Pension, as they’re designed for ease of use and full compliance.
Once that’s in place, you’ll assess your employee’s eligibility, enrol them if needed, and send a formal letter explaining what’s happening. Even if they’re not eligible or if you postpone enrolment, you're still required to write to them.
You’ll begin making contributions from their pay - and your own - usually totalling 8% (5% employee, 3% employer), although these may vary slightly depending on how your payroll is set up.
Finally, within five months, you’ll need to submit a Declaration of Compliance to The Pensions Regulator. This confirms you’ve met your legal duties.
Can You Postpone Pension Enrolment?
Yes. You can postpone enrolment for up to three months - often useful during a probation period or for seasonal staff whose earnings might fluctuate.
However, postponement doesn’t mean ignoring your duties. You must still inform the employee in writing that you're postponing their enrolment and explain their rights to opt in immediately if they choose.
After the postponement ends, if they meet the criteria, you must enrol them and begin contributions.
Your Ongoing Responsibilities After Hiring
Once the initial setup is done, your pension duties continue.
You’ll need to:
Monitor changes in age and earnings that could affect eligibility
Keep accurate records for at least six years
Re-enrol employees every three years if they previously opted out
Continue reporting to your pension provider and The Pensions Regulator
These are non-negotiable legal obligations. Failure to comply can lead to fixed penalties of £400, with daily fines of up to £10,000 if you continue to ignore the rules.
What Else You’ll Need to Set Up
Outside of pensions, there are a few key steps you’ll need to complete to ensure your first hire is legally and financially sound:
Register as an employer with HMRC before their first payday
Set up payroll to manage tax, National Insurance, and pension contributions - please contact us for help with this
Conduct right to work checks and document them properly
Issue a written employment contract on or before their first day, including probation terms and pension info
Take out Employers' Liability Insurance -this is a legal requirement
Meet health & safety duties, even if you operate remotely or from a studio space
You may also need to think about GDPR compliance, holiday pay, sick pay, and other entitlements. These things often seem small at first -until they're not.
You Don’t Have to Work All This Out on Your Own
Hiring your first employee can feel like a leap - financially, legally, and emotionally. But it doesn’t have to feel like guesswork.
As a financial coach to creative and marketing agency founders, I support you through this transition. From calculating the real cost of hiring and managing cash flow, to setting up compliant systems including running your payroll for you, as well as acting as your ongoing sounding board, I’m here to help you grow confidently -not cautiously.
Ready to make your first hire the right way?
Let’s talk about how to grow your agency with the right systems and support in place. Book a free discovery call or get in touch to chat through your plans.
Book a discovery call or email [email protected]
